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Though two San Francisco measures to direct more city funds to affordable housing were on the ballot Tuesday, only one looks set to pass: Proposition C. It’s at 80% in early returns, and is likely to pass, while Proposition I has come in at 56.5% against, and is likely to lose.
Prop. C would increase the amount of money San Francisco allocates to building and preserving affordable, below-market rate housing from around $50 million per year to as much as $125 million. The money would come from setting aside a small percentage of the growth in San Francisco’s general fund revenues or property taxes.
Prop. I would require the city to spend the tax revenue it collects on buildings sold for at least $10 million on building and fixing up affordable housing and assisting tenants. That revenue, about $120 million a year, currently goes into the city’s general fund, and can be spent however the city sees fit.
While Prop. C was a consensus measure, drawing opposition only from San Francisco’s tiny Republican Party, Prop. I faced fierce resistance.
A committee supporting Prop. C and opposing Prop. I raised $2.7 million, the bulk of it from the real estate industry. A fund supporting Prop. I has raised $687,000, mostly from wealthy progressives, including former congressional candidate Saikat Chakrabarti and former city supervisor Dean Preston.
Opposition to Prop. I has come mostly from those who want to lower the transfer tax, which is paid to the county every time real estate is sold. San Francisco levies 5.5% on properties worth between $10 and $25 million, and 6% on buildings that sell for more than $25 million. Housing developers say this tax is part of the reason their projects stall, saying it’s harder to get loans to break ground when taxes eat into the margins.
In 2020, voters passed a Preston-backed measure intended to fund affordable housing by increasing the transfer tax on expensive properties to the current rates. But the revenue from that measure was not legally earmarked for housing, and Mayor London Breed started spending the money on other city services, a practice that has continued under Mayor Daniel Lurie.
Prop. I would lock in the current transfer tax rates, requiring revenue to be spent on affordable housing. And it would ensure that future changes to the transfer tax would have to be approved by voters.
Progressives say that developers and investors who have benefited from the city’s booming real-estate market should contribute to helping solve the housing crisis, and that the current rate on luxury properties is fair.
Developers and the real estate industry have long wanted the transfer tax rates cut, and Lurie and Supervisor Bilal Mahmood announced plans in February to lower the tax by half. In June, Lurie and Mahmood withdrew their proposal, citing the city’s ongoing budget deficit.
If Prop. I fails, it is widely expected that the Mayor or a supervisor will reintroduce plans to cut the transfer tax.
Proposition J, another consensus measure, would close a loophole that had allowed commercial properties in foreclosure to avoid paying transfer taxes. According to city Assessor Joaquín Torres, over the past three years an increasing number of commercial property transactions have claimed the foreclosure exemption,costing the city hundreds of millions of dollars in lost revenue
The city controller projected that Prop. J would bring in $100 million to $150 million annually, and it is set to pass. It currently leads at 79.6 percent of votes so far.
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